Skip to content


Orient Woollen Textile Mills Pvt. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1986)(25)ELT574Tri(Mum.)bai
AppellantOrient Woollen Textile Mills Pvt.
RespondentCollector of Customs
Excerpt:
.....order as stated earlier the appellants preferred this appeal.8. during the hearing of this appeal shri rajagopal, the appellants' learned advocate contended that the adjudication order is wholly illegal inasmuch as it was passed in gross violation of the principles of natural justice. he further contended that the adjudicating authority disregarded the provisions of the act. he had also contended that the adjudicating authority deliberately, wilfully and with ulterior motive suppressed material facts which were patently favourable to the appellants. this amounts to a mala fide action on the part of the adjudicating authority and as such the order of the adjudicating authority became ab initio void. elaborating his contention shri rajagopal urged that in the show cause notice among other.....
Judgment:
1. This appeal arises out of and is directed against the order in original bearinq No. SG-51/83A dated 25-9-1984 passed by the Additional Collector of Customs, Bombay.

2. The brief facts necessary for the disposal of this appeal may be stated as under- The appellants M/s. Orient Woollen Textile Mills Pvt. Ltd. (hereinafter to be referred as the appellants) carry on business of manufacture and export of varieties of textile products including polyester and wool.

On behalf of the appellants, M/s. Gokaldas Hansaraja Shipping Pvt.

Ltd., presented a shipping bill bearing No. 023465 dated 26-7-1983 in the Customs house for export of 600 bales containing 42,000 kgs. of Indian synthetic yarn of composition of 80% polyester fibre and 20% wool and valued at Rs.14,74,200/-. The said shipping bill was completed by the Export Department of the Customs House on the basis of the declaration made therein and also on the basis of the shipping documents signed by Shri S.K. Daga, Director of the appellants' mill.

In order to complete the process of export, the, following examination order was made on the bill "Please inspect lot. Check marks and Nos. Examine 40 packages after selection. Check description and net weight. Also draw one rep.

sample for SASMIRA & T.C. and in duplicate for test by Dy.C.C. to test composition. Follow S.O. 6614 dt. 30-8-77 as amended." 3. On information that the appellants were misdeclaring the description, blend composition and value of the synthetic yarn exported by them under DEEC scheme, the Intelligence Branch of the Customs House, Bombay after registering the case took possession of the shipping, bill and examined the goods covered by the shipping bill. The samples drawn from the export consignments were sent for test to the Customs House Laboratory and also to Central Testing Laboratory of Textile Committee, Bombay. The test carried out by the Central Testing Laboratory of Textile Committee disclosed that the yarn had been spun out of synthetic waste material arising out of defective polyester polyamide fibres during melt spinning. The fibres indicated uneven drawing throughout their length with abrupt variation in Denier resulting due to unsatisfactory polymer condition and/or drawing process, which had led to discarding of this material as waste. The yarn also contained lot of noils and fibres of considerably different lengths. The samples also contained some percentage of fibres other than wool and polyester.

4. On the appellants' request Intelligence Officers of the Customs drew three fresh samples from the export consignments and forwarded to different laboratories for test. The test carried out by the Central Testing Laboratory of Textile Committee, Worli disclosed that the yarn had been spun out of synthetic waste material and that it was not manufactured out of prime polyester fibre imported by them. Its blend composition was ascertained to be 51.87% and 34.96% of polyester and wool respectively as against the declared blend composition of 80% and 20% polyester and wool respectively. Further investigation carried out in this regard confirmed that the synthetic waste materials had been used as raw materials in the manufacture of the export consignments and that imported polyester prime fibre was not at all used or consumed in the manufacture of the product under export.

5. After the completion of the investigation a show cause notice dated 5-3-1984 was issued to the appellants calling upon them to show cause as to why the goods covered by the shipping bill dated 26-7-1983 should not be confiscated? Why the personal penalty under Section 112 and 114 of the Customs Act should not be imposed and why four consignments of imported polyester fibre totally valued at Rs.10,94,699/- CIF should not be confiscated and why they should not be called upon to pay the import duty of Rs.49,47,301/-? 6. By their letter dated 16-3-1984 the appellants sought extension of time by 10 days for sending detailed reply to the show cause notice. By another letter dated 21-3-1984, their Advocate requested for furnishing the copies of the test reports and also the copies of the statements of the Central Excise Officers.

7. The Additional Collector of Customs who held the enquiry passed an ex-parte order. He ordered confiscation of the goods covered by the shipping bill but allowed redemption on payment of a fine of Rs.2,25,000/-in lieu of confiscation. He had also imposed a personal penalty of Rs. 1,20,000/- under Section 112 and another sum of Rs.1,20,000/- under Section 114 of the Customs Act. Feeling aggrieved by the order as stated earlier the appellants preferred this appeal.

8. During the hearing of this appeal Shri Rajagopal, the appellants' learned Advocate contended that the adjudication order is wholly illegal inasmuch as it was passed in gross violation of the principles of natural justice. He further contended that the Adjudicating authority disregarded the provisions of the Act. He had also contended that the Adjudicating authority deliberately, wilfully and with ulterior motive suppressed material facts which were patently favourable to the appellants. This amounts to a mala fide action on the part of the Adjudicating authority and as such the order of the Adjudicating authority became ab initio void. Elaborating his contention Shri Rajagopal urged that in the show cause notice among other things it was stated that the copies of the two test reports of two laboratories were annexed but the copies annexed were of the same laboratories. Further, immediately on receipt of the show cause notice before the date fixed for reply, the appellants made a request to grant them extension of time by 10 days to send a detailed reply to the show cause notice. But then, the authorities did not send any reply to the said letter of request. The request was neither granted nor denied.

Further, the appellants,' Advocate Shri V.N. Deshpande by his letter dated 21-3-84 requested for copies of the test reports relied upon by the department as well as the copies of the evidence of the Central Excise Officers in order to enable him to prepare a suitable reply to the show cause notice. Even that request was not complied with nor any reply was received. Thus no proper opportunity of making representation was afforded to the appellants.

9. It was also contended by Shri Rajagopal that the Additional Collector who held the enquiry did not give any opportunity of personal hearing to the appellants. He, therefore, prayed that the order passed by the Adjudicating authority may be set aside.

10. Shri Krishankumar for the respondent Collector submitted that in their letter dated 16-3-84 the appellants did not complain that the show cause notice issued did not have any annexures. Therefore, they cannot be urged to say that the annexures were not supplied to them.

Shri Krishankumar however, conceded that the records of the case did not indicate that the Additional Collector fixed any date for personal hearing. He had also conceded that no replies seem to have been sent to the letters addressed by the appellants and their Advocate. He, therefore, prayed that the matter may be remanded for denovo consideration. In repoly, Shri Rajagopal submitted that there should not be any remand for denovo consideration. He urged that the Adjudicating authority as well as the customs officers had acted mala fide. They had deliberately suppressed material facts which were favourable to the appellants. Further, by reason of the mala fide acts the appellants had suffered financially. They could not honour their commitments. For these reasons h contended that the matter should not be remanded for the purpose of denovo consideration and the order may be set aside as it is void ab initio. In support of his contention Shri Rajagopal placed reliance on the decision of the Special Bench in Shree Shew Sakti Oil Mills Ltd., Calcutta V. Collector of Customs, Calcutta - 1983 E.L.T. page 1790 (CEGAT)t 11. We have carefully considered the submissions made on both sides. We have also perused the records of this case. The two questions that appropriately arise for consideration are (1) whether there had been a denial of the principles of natural justice and (2) whether the matter merits remand for denovo consideration on mere setting aside of the adjudication order? The Additional Collector had passed an order of confiscation of the offended goods and had also imposed penalties both under Section 112 and under Section 114 of the Customs Act. In his order he had stated that the decision was ex-parte. In the whole of his order he no where stated that a date was fixed for personal hearing and that the appellants failed to avail the opportunity of the personal hearing granted to them. The perusal of his order would go to show that he proceeded to pass the order of confiscation and imposition of penalties because the appellants did not reply to the show cause notice issued to them. On going through the order of the Additional Collector we get an impression that he did not make any distinction between the evidence and the allegation. Without any discussion of the evidence whatsoever he jumped to the conclusion that the charges levelled against the appellants were established beyond doubt. In the whole of his order there was no reference to the two letters written by the appellants and their Advocate. The Additional Collector nowhere stated that the request made by the appellants for extension of time was either granted or not granted. Similarly, the request made by their Advocate for copies were either granted or refused or could not be granted. There had been no proper consideration of any of the issues involved in the matter. The Additional Collector appears to be totally oblivious of the provisions of Section 124. As the order passed by the Additional Collector suffers from several infirmities, we have no hesitation to set aside the same. But then the question for consideration is whether the matter merits remand for denovo consideration or not? 12. We requested Shri Rajagopal to make his stand clear viz. whether he wishes to address arguments on the merits of the case giving up his contention regarding the alleged violation of the principles of natural justice. Shri Rajagopal submitted that he cannot give up his contention regarding the violation of the principles of natural justice.

Therefore, we did not call upon him to address arguments on merits. We have already noticed Shri Rajagopal's contention against the remand for denovo consideration.

13. On going through the records of the case, we are unable to agree with the submissions made by Shri Rajagopal that the Customs Officers as well as the Additional Collector who adjudged confiscation and penalties deliberately, wilfully and with ulterior motive suppressed material facts which were patently favourable to the appellants, and that they were guilty of mala fide. We are inclined to think that there was negligence and to certain extent ignorance on the part of the Customs Officers and the Adjudicating authority. We do agree with Shri Rajagopal that some hardship had been caused to the appellants. But we are unable to agree with his contention that because of the hardship there should be no remand particularly when the appellants themselves complained that the adjudication order was bad in law for non compliance of the principles of natural justice. The decision relied upon by Shri Rajagopal cannot be made applicable to the facts of the present case.

14. The shipping bill was dated 26-7-83. Show cause notice was issued on 5-3-84. The order of adjudication was dated 25-9-84 communicated on 17-10-84. The appellants filed their appeal on 15-1-85. It is being disposed of this date. In the decision relied upon by Shri Rajagopal, the President of the Tribunal, his Lordship Shri Justice F.S. Gill with whom the other two members concurred held that even though there may be a piece of important evidence, yet it would not be feasible to relegate the parties after a lapse of three decades to a stage as it was in 1956. His Lordship further observed that for non-feasance, or mis-feasance, the Department must bear the legal consequences. It is thus seen that the refusal to the remand of the case was on the ground that the matter came up before the Bench after a lapse of three decades. The perusal of the order also goes to show that the Bench considered the case on merits. In the instant case the appeal is heard even before the expiry of a year from the date of issue of adjudication order and six months from the date of filing of the appeal. Therefore, the ratio of the decision of the above referred case, in our opinion, is not applicable to the facts of the present appeal.

15. The question that still remains for consideration is whether the matter should, be remanded for denovo consideration? We have noticed earlier that the appellants' request for extension of time for filing the reply and the request of their Advocate for supplying of copies of certain documents were not complied with nor any reply sent. We have further noticed that the Additional Collector who held, the enquiry did not even grant a personal hearing to the appellants. Section 124 of the Customs Act reads:- "No order confiscating any goods or imposing any penalty on any person shall be made under this chapter unless the owner of the goods or such person (a) is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; (b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and If only the Additional Collector had cared to notice this Section he would not have committed the mistakes which he had committed.

Section 124 embodies the well-known principle of audi alteram Partem. No person shall be condemned unheard. This Section requires the issue of a notice before an order for confiscation of any goods or imposition of any penalty on any person is made. It further requires that the notice should be in writing unless waived by the person concerned and it should contain grounds on which it is proposed to confiscate the goods or to impose a penalty. It also requires of giving an opportunity of making a representation in writing by the person to whom the notice was issued. It further requires of giving a reasonable opportunity to that person of being heard in the matter.

16. The procedure followed in an adjudication proceedings is altogether different from the one followed in the Courts of law. There is no obligation to record evidence of any witness. Their statements are relied upon. The documents are relied upon without examining their admissibility. The proceedings are not governed by the strict rules of Evidence Act. The Evidence Act and the Criminal Procedure Code are not made applicable to the adjudication proceedings. All the same, the fundamental principles of Criminal Procedure Code are applicable.

17. Having regard to the procedure adopted by the Adjudicating authorities, it is of fundamental importance that the person sought to be penalised should be informed before hand, the statements of the witnesses and the documents and other materials which the department relies upon in the adjudication. Then only it could be said, that a person concerned had a fair and reasonable opportunity to defend himself against the proposed action. It is also fundamental that no material of which the person affected had prior notice could be relied upon. It is, therefore, necessary that the department should furnish the copies of the statements of the witnesses and documents to the person proceeded against. If for any valid reasons, the copies cannot be supplied, the affected person should have an opportunity to inspect the documents and to take extracts of the same. He should also be given reasonable time to make representations against the proposed action.

18. In the instant case, in spite of the request for extension of time to reply, the request was neither granted nor rejected. Similarly, in spite of the request for supply of copies, it was neither granted nor rejected. Again even though the statute requires of affording a personal hearing no personal hearing was also granted. In the circumstances, we are fully satisfied that there had been a violation of the principles of natural justice which Section 124 of the Act embodied.

19. In AIR 1965 Kerala P.286 the Kerala High Court observed "Natural Justice is the name given to certain fundamental rules which are considered so necessary to the proper exercise of power that they are projected from the judicial to the administrative sphere. This is because experience has shown that there is much truth in the aphorism of Lord Action that "power tends to corrupt and absolute power corrupts absolutely".

20. On consideration of all the aspects we are satisfied that the appellants were not given a reasonable opportunity to effectively put forward their defence and were also not given an opportunity of being heard in the matter. We, therefore, set aside the order passed by the Additional Collector. Since we had rejected Shri Rajagopal's contention that there should not be any remand and since we had not heard Shri Rajagopal on mertis and as we are setting aside the order for non compliance of the rules of natural justice, we direct the Additional Collector to consider the case afresh after affording a reasonable opportunity both in the matter of furnishing of copies of the documents or inspection of the documents and of granting personal hearing to the appellants.

21. In the result we allow this appeal, set aside the order passed by the Additional Collector and remand the matter for consideration afresh in the light of the observations contained in this order.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //